Jindal: No more income taxes for Louisiana

posted at 6:08 pm on March 14, 2013 by Erika Johnsen

President Obama and the Democrats have been talking a big game about closing loopholes on “the wealthy,” “big oil companies,” “corporate jet owners” and all manner of greedy societal bottom-feeders (or something) as an ostensible method of (ever-so-slightly) reducing our budget deficit, and it isn’t that Republicans are so very opposed to the idea of closing tax loopholes — but they need to come as part of an at least revenue-neutral effort to simplify the tax code and lower overall tax rates. Otherwise, it’s just a fancy and deceptive way of saying, hey, let’s hike taxes to try and bring in still more revenue for our big-government agenda!

In the unlikelihood of lower across-the-board taxes happening on the federal level anytime soon, several states have been promising to take federalism by the horns and lead by example with tax-code simplification, and Louisiana Gov. Bobby Jindal unveiled his specific plan to create and more pro-growth and business-friendly climate in his state on Thursday.

The proposal will create a simplified tax system to accelerate job creation and business growth in Louisiana. Despite one of the lowest state/local tax burdens in the country, Louisiana’s tax structure often is poorly perceived because of its complexity. By levying nearly all major tax types including personal and corporate income taxes, Louisiana’s current tax climate results in competitive disadvantages for businesses and individuals by penalizing hard work and increased earnings.

The plan will transform Louisiana’s tax system into a model that is simple, stable, and modern. The plan will eliminate two major tax types: personal income tax and corporate income and franchise tax. Eliminating income taxes in a revenue-neutral manner and improving sales tax administration will dramatically simplify Louisiana’s tax system and reduce administrative problems for families and small businesses. The effective start date of the program is January 1, 2014.

The plan will ensure revenue neutrality by:

-Eliminating~$2.7 Billion in personal income tax and corporate income and franchise tax

-Eliminating over 200 exemptions, resulting in $114 Million in additional revenue

-Broadening the state sales tax base and raising the state rate to 5.88%, which will result in ~$2.1 billion in revenue

-Maintaining vital local tax offsets and business competitiveness incentives

In a nutshell, it’s an elimination of all personal income and corporate income taxes, plus the state franchise tax on capital stock and a bunch of exemptions, in exchange for an increase in the state sales tax from 4 percent to 5.88 percent. It’s more simple, more efficient, and Americans for Tax Reform is a big fan:

Jindal unveiled what could be, if approved by the legislature, the boldest, most pro-growth state tax reform in U.S. history. …

Many governors around the country have proposed rate-reducing tax reform, but Jindal’s plan sets a gold standard for pro-growth reform. His proposal could mean more disposable income for families while increasing the job-creating capacity of employers across the Pelican State.

It would also make Louisiana’s tax code more conducive to economic growth. A recent Organization for Economic Cooperation and Development report ranked taxes according to their negative economic impact. The study concluded that taxes on income and capital, which Jindal’s plan would eliminate, were the most damaging.

Louisiana ranked 32nd on the nonpartisan Tax Foundation’s 2013 State Business Tax Climate Index. If Jindal’s plan is approved and signed into law, the state will jump to No. 4 on that index.

Dems counter with bill to establish minimum spending limits for households with incomes over $200,000 ($250,000 for married couples). This allows the current printing of bumper stickers (Ask the rich to pay a little bit more) to remain relevant.

That’s nice. Unfortunately the tax slack is readily taken up by the feral government and the state tax deductions that are meant to help the leftist states leech off of the others, as usual for leftists.

Isn’t that wonderful! Those of us who have paid exorbitant income taxes our entire lives and are now retired will face new ‘revenue neutral’ sales, fees, tolls, and property taxes taxes now that we no longer earn much taxable income. We were screwed then and are screwed now. Thanks, you ‘revenue neutral’ tax shifters.

How about actually cutting ALL taxes, tolls, and fees and screwing the progressive beneficiaries of government ‘benevolence’ instead. Oh no! Republicans could never win elections if they do that!

I’m a Californian who has an opportunity to move to Texas and I’ve been investigating the cost of living differences (companies always trot out the “but it’s so much cheaper here” to coax you into a lesser salary).

My cursory findings are not encouraging. Texas is making up for their lack of income tax with property taxes.

Granted Prop 13 has kept property taxes low-ish in California (but also led to the explosion in other taxes to make up for it), however, I’m paying around 6k in taxes for my 390k home. In Texas it will be 9k for a 350k home.

So, in TX, home owners are footing the biggest portion of taxes. It seems to me that, while I HATE income taxes, they’re more fairly distributed if the alternative is to go after properties.

This whole issue becomes a shell game. We need an algorithm that takes into account all of the various fees and taxes and computes them into a percentage of your salary that will go to the state.

I’m sure when all is accounted for you pay more in taxes in CA than TX but it’s going to take a lot of research to say that explicitly.

Some Republican Governors are opting to reduce or eliminate income taxes because they know that businesses are attracted to that. In the short term, it looks good for them. Most politicians are perfectly happy to screw over their electorate in the long term in order to look good in the short term. For retirees in those states, the income tax is mostly irrelevant. They must pay all sales taxes, all fees, all tolls, and all property taxes. The tax shifting governors are not decreasing their state’s total tax revenues. They are merely shifting the tax burden from young workers to the retirees of their states. Whoo hoo. Bravo, you Republican tax shifters!

You might also want to consider what kind of house you get for that $390K. In Colorado, I paid that much for my house 12 years ago and it’s 4500 square feet, and my annual property taxes are about $2700. But we also have a 4.7% income tax and a total sales tax in my area of about 7.4%. I’m guessing a $390K house anywhere in CA is nowhere near that size.

A few years back, I considered a move to Omaha, NE where I found the same price would get me a house of about 1000 sf less than I have, and a property tax of about $9K a year, as well as nearly the same income taxes. So I didn’t move.

The California property taxes are equivalant or greater than any I’ve seen in Texas.

Minor details such as WC, Litigation, Income tax, utility costs, property costs, overall insurance costs, labor costs, crime and other quality of life issues also come into play. I’m not really aware of any Texas cities bankrupt or having the copper wires stolen right off the power poles.

My guess is you are government worker muddying up the water. Nice try. Go back to watching MSNBC.

You might also want to consider what kind of house you get for that $390K.

dentarthurdent on March 14, 2013 at 6:55 PM

Thanks for the input! And we would definitely be moving into a much bigger house. Currently it’s 1800 sq ft and we’re looking at minimum 3200 sq ft in TX, which is one of the reasons we got excited about moving there :)

You might also want to consider what kind of house you get for that $390K. In Colorado, I paid that much for my house 12 years ago and it’s 4500 square feet, and my annual property taxes are about $2700. But we also have a 4.7% income tax and a total sales tax in my area of about 7.4%. I’m guessing a $390K house anywhere in CA is nowhere near that size.

dentarthurdent on March 14, 2013 at 6:55 PM

My house in Texas is less than half the size of yours and was less than half the cost. However, my Texas property taxes are almost $4,000. San Antonio sales taxes are over 8%. Don’t you just love the concept of tax shifting as opposed to real total tax reduction.

Percentage-wise, Property taxes are higher in TX than they are CA (as I said, mostly because of Prop 13).

I’m a registered Republican.

I do not work for the government.

You’re a tool. The minimal..tiniest effort you could’ve applied towards finding out anything about me would’ve been to click on the link from my posts which would’ve enlightened you to exactly what I do.

Your ignorant, blatantly stupid response says a lot more about you than it does me.

I truly do not know what you mean. Is your quote a compliment or a criticism? As a retired person, I have to pay all the shifted taxes (e.g., exorbitant property and sales taxes) or else risk losing my house or my freedom.

Here’s the thing: When you TAX something BY DEFINITION you will get LESS of it (in the overall economy).

The best example of this is “sin taxes” (cigs, cigars, booze, gambling, etc).

Now then let us ask the proverbial question here:

Do we want people to SAVE LESS money and SPEND it on things that they mostly can’t afford (new car, extra super duper big TV, etc)?

Or do we want people to SAVE MORE money and NOT SPEND every last red cent on things that are quite frankly luxuries?

If you jack up sales tax….guess what overall people spend LESS, save MORE, and businesses get to use that extra capital to hire more.

And those filthy filthy evil rich people (sarc intended) that buy the extra mansions, cars, boats, etc pay MORE because quite frankly…..you can’t really hide from sales taxes, they are collected at point of sale.

My house in Texas is less than half the size of yours and was less than half the cost. However, my Texas property taxes are almost $4,000. San Antonio sales taxes are over 8%. Don’t you just love the concept of tax shifting as opposed to real total tax reduction.

Ceteris Paribus on March 14, 2013 at 7:09 PM

I don’t like it when they do that, but you do have to try to figure out the overall effect of whether what they take from you is going up or down. For instance, under the last Dem governors, Colorado has significantly increased the “fees” for car license plates – because they have to allow the people to vote on “tax” increases.
I do believe that jindal is on the right track though, because eliminating income taxes also eliminates a huge labor burden on taxpayers for doing the paperwork, and eliminates a decent amount of gubmint bureaucracy. I personally favor that approach for the federal level as well – eliminate income taxes and we can potentially eliminate the IRS. That’s a plus in my mind.

I do believe that jindal is on the right track though, because eliminating income taxes also eliminates a huge labor burden on taxpayers for doing the paperwork, and eliminates a decent amount of gubmint bureaucracy. I personally favor that approach for the federal level as well – eliminate income taxes and we can potentially eliminate the IRS. That’s a plus in my mind.

dentarthurdent on March 14, 2013 at 8:21 PM

Yes. No state or federal income taxes are desirable to conservatives. Shifting the government ‘revenue’ sources to other people via increased sales and property taxes, tolls, and fees is a bad thing. In the case of Governor Bobby Jindal, he is NOT cutting government, he is simply shifting Louisiana state revenue mandates from one group of slaves (i.e., citizens) to another. A REAL decrease in total government spending (and thus a decreased need for the same level of taxes, tolls, and fees) is night and day better. Why can’t we have a conservative candidate who actually wants to CUT the size and cost of government? Why? Why? Why? Please God, why?

Good for Jindal! He should implement the sorts of protections that Tim Eyman has promoted up here in Washington State. The same thing needs to be done nationally. I hope Rand Paul will dump his flat tax proposal and promote a fair-tax instead, a national sales tax is far more consistent with freedom and liberty than a flatter version of the current federal tax regime. If Rand won’t do it then perhaps Jindal will be competitive in ’16.

Oh yeah, let’s dump the Rand Paul flat income tax proposal that has the same rate for everybody who earns income in favor of an Orwellian Fair [sales] Tax that taxes the poor and the retired when they pay for their food and shelter in order to survive. You guys are evil geniuses.

Oh yeah, let’s dump the Rand Paul flat income tax proposal that has the same rate for everybody who earns income in favor of an Orwellian Fair [sales] Tax that taxes the poor and the retired when they pay for their food and shelter in order to survive. You guys are evil geniuses.

Ceteris Paribus on March 14, 2013 at 9:02 PM

Personally, I don’t believe in any income tax. In fact, I don’t think the government should be allowed to arrest, jail, or fine those who don’t want to pay taxes of any kind…just don’t complain if you don’t pay and the infrastructure and services you depend on erode.

Most people, I feel, would not have a problem paying what they consider to be a fair tax percentage, they can see what they’re getting for their taxes, and they know that’s it’s not going to disappear into black holes (corrupt politicians’ pockets, officials, bankers, foreign interests, mega-corporations, waste, etc.)

I’m in favor of a national sales tax. Those who have more money to spend will kick in more money than the poor who have less to spend proportionately. Also, people will have a chance to spend what they earn, rather than what’s left over after the bureaucrats pilfer their paychecks.

Ceteris: One massive advantage of going to a sales tax over an income tax is that it immediately gives people skin in the game. It is perhaps the easiest method of doing so.

Does it hurt people with little and/or fixed income? Probably, yes. Would it be better if you just lowered the tax rates? Certainly.

Your posts, however, are basically ‘don’t make MY taxes go up’ NIMBYism. I am strongly reminded of my mother, who is very conservative but believes she is entitled to SS benefits (not that she needs them) ‘because she paid into it her entire life’. Yeah, she did. Statist politicians destroyed everything she paid for. At this point, I highly doubt that she will see anything near what she paid into it, and nor should she. It’s not her fault that the fund is bankrupt, but it is, and she should not expect anything from it.

I know that I have precisely 0 change of ever seeing a dime I have ever paid into SS.

Something you note about the income tax, as opposed to the sales tax, is that it is the same rate ‘for everybody who earns income’. Considering the Handout generation, that is certainly not as universal as a sales tax. Another possible ‘issue’ is that it will create a larger black market in this country, but by the same token, it will remove a large incentive for the labor black market we currently have (i.e., illegal aliens and others working under the table).

I feel for your position, but deriding those who are trying to find a more equitable situation for everyone as ‘evil geniuses’ certainly does not help your cause.

I’m in favor of a national sales tax. Those who have more money to spend will kick in more money than the poor who have less to spend proportionately.

Dr. ZhivBlago on March 14, 2013 at 9:10 PM

For those who have no income but have savings adequate in the current system where there is no national sales tax, to suddenly have to accommodate a new Herman Cain 9% national “fair” sales tax? Or how about a 20%+ national sales tax? Should these people stand by their mailboxes every day to await their charity checks from concerned citizen donors to make up for their national sales tax losses? Do you really support this?

Oh, I must be a NIMBYist traitor because I don’t want to pay a new national sales tax so that billionaires in Manhattan can continue to get their farm subsidies for their untended farms in flyover country. Or so that Hollywood filmmakers can use their tax breaks to upgrade to the latest business jets. Or so that millions of human leeches can continue their normal sucking routines. Communists love to blame slackers and traitors for the failure of their wonderful system. I prefer a tax solution that derives directly from the Declaration of Independence and the Bill of Rights #2.

Thanks for the input! And we would definitely be moving into a much bigger house. Currently it’s 1800 sq ft and we’re looking at minimum 3200 sq ft in TX, which is one of the reasons we got excited about moving there :)

hisfrogness on March 14, 2013 at 7:03 PM

So your complaint about the higher property taxes in TX are not proportional to your expectations. You are almost doubling the size of your living footage, and probably vastly upgrading the type of neighborhood you live in, and getting probably a newer house with better building materials on top of that.

Take it from me, I moved from CA to TX and you can buy an amazing house for the money there. If you were to transplant that same house out to CA at current market prices, your prop 13 property tax on that said house would probably be higher than the same property tax on that same house in TX. Meanwhile, you are not subject to that onerous progressive income tax that they have in CA.

Fuel taxes are cheaper in TX, too. And did you compare electricity prices? Way cheaper in TX.

We have a sales tax up here in Washington State there is no tax on most groceries.
FloatingRock on March 14, 2013 at 9:58 PM

In order to fully replace Federal Income Tax revenues, a national sales tax would have to be north of 20% and be all-inclusive (e.g., including necessities of life) to fund current Federal obligations. As a tea partier, I want to significantly reduce those Federal obligations first then we can talk tax policy changes.

I’m not smart, or knowledgeable, enough to get into any of these high finance discussions in detail. Having said that, it sure seems to me that (1) any complicated tax that is replaced with a simple one is a bonus and (2) ‘taxes vs revenues’ is not a zero-sum game.

In order to fully replace Federal Income Tax revenues, a national sales tax would have to be north of 20% and be all-inclusive (e.g., including necessities of life) to fund current Federal obligations. As a tea partier, I want to significantly reduce those Federal obligations first then we can talk tax policy changes.

Ceteris Paribus on March 14, 2013 at 10:32 PM

As a Tea Partier, I respectfully disagree as I believe that the easiest way to reduce them is to make EVERYONE (especially the takers in the current system who get “free money”) pay in. The easiest way to do that is scrap the convoluted income tax (or at the very least kill withholding) and replace it with a very simple sales tax.

23-25%
On everything.

Used goods (used cars, used homes, etc) exempt.

Poverty level refund: everyone gets back-monthly an amount equal to the poverty level for their region which cuts down on the “I can’t afford groceries argument”

Then people will go “Holy crap WHY MY TAXES SO HIGH???!!!” and then we can say “Hey folks you wanted this great big govt-now y’all get to pay for it. Wanna pay less? Then downsize the damn thing!”

Here’s a short and very incomplete list of what you don’t say in your argument for a national sales tax:

1) there is no call to repeal the 16th Amendment and eliminate the IRS
2) there is no call to reduce the huge amount of existing wasteful government spending
3) there is no call to eliminate the complexities created by having used item exemptions or poverty level refunds.

More in depth…are poverty level refunds going to be means tested like food stamps and Medicaid currently are? If so, then you cannot have a poverty level refund if you have more than $2,000 in savings or non-essential assets. For someone who retires at 65 and expects to live until 85, a savings account of $200,000 will yield them the princely sum of $10,000 per year in retirement. This will completely disqualify them from poverty level refunds until late in their last year of life.

20% is a lot better than it is now because the burden will be more equally distributed across the entire population. Since everybody will be paying their fair share, and everybody will be paying the same percent without corruption favoring some groups at the expense of others, the burden is lessened overall. Everybody will be pulling the wagon. Once everybody is paying their fair share everybody will have stake in spending and taxes.

I want to significantly reduce those Federal obligations first then we can talk tax policy changes.

The fact that the current income tax regime is so corrupt, serving the interests of cronies and special interests, is part of the reason we can’t “reduce federal obligations”. Changing to a sales tax is step one.

I’m a Californian who has an opportunity to move to Texas and I’ve been investigating the cost of living differences (companies always trot out the “but it’s so much cheaper here” to coax you into a lesser salary).

My cursory findings are not encouraging. Texas is making up for their lack of income tax with property taxes.

hisfrogness on March 14, 2013 at 6:47 PM

You need to look harder and at better resources then. This is part of what I do for a living and have access to standard COL comparator information. Those resources show that, for home owners, California is about 30% more than Texas. Can’t provide details due to licensing issues but trust me, there is no comparison between CA and TX in terms of COL.

I live in the county, but the city nearby has a pillow tax on local motels. They have gotten quite a lot of money from this and happily notified everyone that since it worked out so well, they are going to double it. This is the same bunch that wanted to raise the city tax on gas stations to pay for sidewalks, oh, and they would build a few more walking trails in the county just to be fair. We told them to shove it. The state proudly touts that it has no sales tax but there are tourist areas that do. They never did lower the property tax.